News
Central Bank: No immediate threat of inflation rise from monetary expansion
By Sanath Nanayakkare
Sri Lanka was currently experiencing high monetary expansion, but the Central Bank did not expect an acceleration of inflation in the near future, Economic Research Director at the Central Bank Dr. Chandranath Amarasekara told The Island yesterday.
Answering a query on the broad money growth and its wider implications, Dr. Amarasekera said, “At the end of 2020, broad money expanded by 23.4% compared to the end 2019. The extraordinary circumstances caused by the COVID-19 pandemic required increased credit to the government from Sri Lanka’s banking system, and the historically low interest rate structure also resulted in a pickup in the growth of credit to the private sector in the second half of the year. This policy driven expansion in broad money supply was essential for the country to dampen the effects of the economic downturn caused by the pandemic.”
“As the Sri Lankan economy is operating below its potential, we do not project a demand-driven acceleration in inflation in the near term. Even the relatively high economic growth projected for 2021 will be partly driven by the low base in the previous year, and therefore, it is unlikely that there will be an overheating of the economy in 2021 as well, although we envisage a monetary expansion of 21%.”
“However, as the authority responsible for the money stock of the country, the Central Bank remains cautious about any excessive expansion in money growth. Nevertheless, the close relationship between money and inflation that we used to see in the past is no longer in existence. For example, during the most part of a period of single digit inflation that Sri Lanka experienced since 2009, broad money growth has remained above 15%. The breakdown of the close relationship between money growth and inflation is also one reason for the Central Bank to move away from a monetary targeting framework towards a flexible inflation targeting framework to conduct monetary policy. Anchoring of inflation expectations has also helped curb the inflationary effects of exchange rate movements as well. Many other countries have also experienced similar situations.”
“When the economy recovers and demand conditions improve, the Central Bank will take appropriate action to make necessary policy adjustments to ensure the continuation of inflation at the desirable levels of mid-single digits without disrupting the growth process,” Dr. Amarasekara said.
News
Lanka enters new phase of prosecutions as hurdles clear
MONETABRIEF –The prosecution of high-profile individuals from the former Rajapaksa administrations is set to escalate this month with the clearing of legal hurdles and administrative bottlenecks, according to officials involved in the process.
Former president Gotabaya Rajapaksa’s attempt to secure an order preventing his arrest in connection with the Easter Sunday massacre was turned down by the Court of Appeal on Thursday.
An overseas travel ban has been in operation against Rajapaksa since June, but the Criminal Investigations Department made no move to question him. He instead filed a writ application seeking an order preventing his possible arrest.
President of the Court of Appeal Rohantha Abeysuriya noted that the court would not interfere with the investigative process. Any attempt by the court would amount to an obstruction of the investigation.
In an unrelated case, the same court rejected an application by opposition legislator Dilith Jayaweera seeking the quashing of a contempt charge filed against him by the Fort magistrate. The charges against Jayaweera and a few other opposition politicians are expected to be taken up in the coming week.
Jayaweera and other opposition politicians — Wimal Weerawansa, Udaya Gammanpila, Sugeeshwara Bandara, and Asanka Navaratne
— were hauled up over their remarks relating to the arrest of Suresh Sallay, the former head of the State Intelligence Service.
SLPP academic Mahinda Pathirana is also charged over his public comments about Sallay’s arrest in February under the draconian Prevention of Terrorism Act.
Former president Mahinda Rajapaksa’s son, legislator Namal Rajapaksa, is already in remand custody following his arrest in connection with three cases of bribery and money laundering relating to the 2013 Airbus deal and the Krrish property development in Colombo.
Although Namal has been granted bail in the Airbus money laundering charge, he is in custody until October 13 over the bribery charge relating to the same Airbus transaction. His arrest is under a provision of the Anti-Corruption Act that does not allow a magistrate to grant bail unless under exceptional circumstances.
Meanwhile, his mother Shiranthi Rajapaksa, who had been asked to report to the Financial Crimes Investigations Division on September 24, was a no-show and was yet to return from Singapore.
She had travelled overseas on September 16, and a family spokesman said she was handed the FCID summons at the departure lounge of Bandaranaike International Airport just before she boarded a flight to Singapore.
At the time, the family spokesman said she was due to return in three days.
“We will see greater momentum in the legacy cases in the coming weeks,” an official involved in the prosecutions said.
“We have cleared the legal hurdles to press ahead with more arrests,” he said.
“We are working on a few administrative issues which will be resolved very soon.”
The controversial prosecution of former President Ranil Wickremesinghe is dragging on without him being formally indicted since his arrest in August last year. The Fort magistrate has listed the case again for November 11, when the Attorney-General is expected to report on his decision regarding action against Wickremesinghe.
News
Police warn: Court evaders face property seizure
Police have reminded the public that courts have the power to take legal action against individuals who evade arrest or remain in hiding after warrants have been issued against them.
Police said that under Section 60 of the Code of Criminal Procedure Act No. 15 of 1979, a court could issue a written proclamation requiring a person evading arrest under a warrant to appear at a specified place and time.
The proclamation must allow the person at least 30 days to appear before court, Police said.
If the person fails to appear even after the proclamation has been issued, the court may take further action under Section 61 of the Act.
This includes issuing an order for the attachment of the movable or immovable property belonging to the person concerned.Police issued the reminder highlighting the legal measures available against persons who deliberately evade arrest and remain in hiding after warrants have been issued.
News
Nearly 20 Iranian tankers stranded off Lanka amid US sanctions
Around 20 Iranian oil tankers are reportedly stranded about 15 nautical miles off Sri Lanka’s southwestern coast, with several vessels facing shortages of food, fuel and fresh water amid tightening US sanctions and maritime restrictions, The Wall Street Journal reported.
According to the report published on Thursday (1), US officials have in recent weeks urged Sri Lanka to prevent local vessels from supplying essential provisions to the tankers and their crews.
The report, citing Sri Lankan Government documents and companies involved in supplying the vessels, said the US had raised concerns over assistance being provided to the sanctioned tankers.
The situation follows the United States’ decision to reimpose a maritime blockade of the Strait of Hormuz in July, which has reportedly left dozens of Iranian and Iran-linked tankers involved in transporting sanctioned oil to China stranded near Asian countries, including Sri Lanka and Malaysia.
Most of the vessels are reportedly empty tankers that had previously transported Iranian crude to Asia, often through ship-to-ship transfers, before preparing to return to Iran for additional cargo.
The WSJ reported that the US Embassy had warned Sri Lanka in August that it was monitoring 19 Iranian tankers off the country’s western coast and had raised the possibility of secondary sanctions against companies providing services to sanctioned vessels.
Sri Lankan authorities have maintained that the vessels are located outside the country’s 12-nautical-mile territorial waters and that the Government is not providing them with logistical assistance.
Meanwhile, shipping companies told the WSJ that obtaining approval to supply essential items, including food, drinking water and fuel, as well as repair services, to the Iranian vessels had become increasingly difficult.
Separately, Reuters reported in late August that 27 sanctioned Iran-linked tankers were waiting off Sri Lanka without cargo.
The Trump administration has also imposed additional sanctions on Iran and warned countries and companies trading with Tehran of potential consequences, as Washington seeks to pressure Iran to make concessions amid the ongoing conflict.
Similar concentrations of Iranian-linked tankers have been reported off Malaysia, where waters have historically been used for ship-to-ship transfers of Iranian crude destined mainly for China.
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